LME scrap monthly trading volumes surge

Scrap futures contracts on the London Metal Exchange fell in the week to July 29, while monthly trading volumes surged

S&P Global Platts assessed the July scrap contract down $4.50/mt week on week to $487/mt July 29, while the August contract dropped $9.50/mt to $488.50/mt. The September contract lost $8.50/mt on the week to $487.50/mt, while October fell 25 cents/mt to $494.50/mt.

The contango structure for the July-August portion of the forward curve softened, while September was in a slight backwardation to August. This suggests futures traders hold expectations that physical prices may recover slightly or stabilize over August and September trading, following a sharp drop over July.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) fell $10.50/mt on the week to $469.50/mt CFR Turkey July 29, as Turkish mills continued to lower prices for further August shipment cargoes, amid ample cargo availability and a limited timeframe to conclude remaining August shipment sales.

“I think there are limited mills who are looking for bookings…Others are waiting for a further drop to $450-$460/mt CFR,” a Turkish agent said.

“European collection costs are high, but the Americans killed the market, so waiting for a miracle means wasting time,” a second agent said. “Nobody knows if tomorrow another American sells at $465/mt CFR — can the Baltic sellers take this risk? I don’t think so.”

However, the later-dated September-October portion of the LME scrap forward curve switched to a strong contango on the week, suggesting that futures traders expect physical prices to start gaining strength while moving into the fourth quarter.

Weekly LME scrap futures trading volumes over the week to July 29 totaled 57,850 mt, down from 75,980 mt last week. The July month-to-date levels jumped to 219,600 mt, compared with 159,410 for the whole month of June.

Near-term rebar futures for July also dipped on the week, while the August to October contracts saw sharp gains. This meant the contango structure for the July-August portion of the forward curve also strengthened, while the August-September portion of the curve shifted into a contango from a soft backwardation on the week.

This suggests that futures traders may expect physical rebar prices might gain in the near term.

Platts assessed the July contract down $3.50/mt on the week to $725.50/mt July 29, while August gained $4/mt to $739.50/mt. The September contract rose $11/mt on the week to $744.50/mt, while the October jumped $10/mt to $744.50/mt.

Turkish physical rebar export prices dropped $10/mt on the week to $715/mt FOB July 29, as scrap prices softened and a lack of demand pushed workable levels lower. Sources, however, reported a disconnect between regional mill offers, as Marmara mills cited higher offer levels compared to Izmir or Iskenderun mills.

The daily outright spread between Turkish export rebar and import scrap was assessed at $245.50/mt July 29, up 50 cents/mt on the week.

Rebar futures weekly trading volumes this week on the LME totaled 10,930 mt, sharply up from 4,150 mt last week and their highest level since the week ending July 8, when trading volumes totaled 11,980 mt.

— Rabia Arif, Viral Shah